Asian Stocks Rise on Less-Hawkish Fed Policy and China's Expected Expansionary Monetary Policy

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Asian Stocks Rise on Less-Hawkish Fed Policy and China's Expected Expansionary Monetary Policy

Asian markets are on the rise following the S&P 500's strong recovery on Thursday, with investors ignoring the potential risks of a global banking crisis and focusing instead on rising expectations of a smaller interest rate hike by the Federal Reserve (Fed). The US Dollar Index (DXY) has fallen sharply below 104.10 as investors seek safer assets, with the stock market rally suggesting an increase in market participants' risk appetite.

In Japan, the Nikkei225 has surged 1.14%, while in China the ChinaA50 has climbed 1.33% and the Hang Seng has soared 1.72%. The People's Bank of China (PBoC) is set to announce an interest rate decision on Monday, and an expansionary monetary policy is expected due to the need for stimulus to trigger demand in the Chinese economy following the rollback of pandemic controls.

The PBoC may reduce the Loan Prime Rate (LPR) at its next meeting on March 20, according to UOB Group economists. They suggest that the 1Y LPR could fall to 3.55% and the 5Y LPR to 4.20% in March, following the National People's Congress (NPC), due to the need for further support measures toward the real economy and for the 5Y LPR to fall further to boost demand for homes.

In Japan, the yen has become more attractive as a safe-haven asset after the collapse of Silicon Valley Bank (SVB). Ex-Bank of Japan Governor Haruhiko Kuroda has also advocated for more rate cuts, despite the BoJ's current interest rate being negative. A further rate cut would indicate that more stimulus is required to trigger more demand.

Oil prices have also risen above $69.00, driven by an upward revision in China's Gross Domestic Product (GDP) to 6.0% by Goldman Sachs, suggesting increased oil demand ahead. Earlier, the investment banking firm projected a growth rate of 5.5%.

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